Economy - overview:
The US has the most technologically powerful, diverse, advanced, and largest economy in the world, with a per capita GDP of $33,900. In this market-oriented economy, private individuals and business firms make most of the decisions, and government buys needed goods and services predominantly in the private marketplace. US business firms enjoy considerably greater flexibility than their counterparts in Western Europe and Japan in decisions to expand capital plant, lay off surplus workers, and develop new products. At the same time, they face higher barriers to entry in their rivals' home markets than the barriers to entry of foreign firms in US markets. US firms are at or near the forefront in technological advances, especially in computers and in medical, aerospace, and military equipment, although their advantage has narrowed since the end of World War II. The onrush of technology largely explains the gradual development of a "two-tier labor market" in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get pay raises, health insurance coverage, and other benefits. Since 1975, practically all the gains in household income have gone to the top 20% of households. The years 1994-99 witnessed solid increases in real output, low inflation rates, and a drop in unemployment to below 5%. Long-term problems include inadequate investment in economic infrastructure, rapidly rising medical costs of an aging population, sizable trade deficits, and stagnation of family income in the lower economic groups. The outlook for 2000 is clouded by the continued economic problems of Japan, Russia, Indonesia, Brazil, and many other countries. Domestically, the potentially most serious problem is the exuberant level of stock prices in relation to corporate earnings.